DCIT, CC-III, Ludhiana V. M/s SEL Textiles Limited, Ludhiana

ITA 300/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2109 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-10-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S PHANI KISHORE
• Section: 43B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! . .., # $, %& BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 300/CHD/2018 / ASSESSMENT YEAR : 2014-15 THE DCIT, CENTRAL CIRCLE-III, LUDHIANA M/S SEL TEXTILES LTD. 274, G.T. DHANDARI KHURD, LUDHIANA ./PAN NO: AANCS0401M / APPELLANT /RESPONDENT ! /ASSESSEE BY : SH. G.S. PHANI KISHORE, CIT DR ' ! / REVENUE BY : SH. ASHWANI KUMAR, CA # $ % /DATE OF HEARING : 30.10. 2018 &'() % / DATE OF PRONOUNCEMENT : 14.11. 2018 %'/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 20.12.2017 OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-2, JALANDHAR [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE REVENUE IN THIS APPEAL HAS TAKEN FOLLOWING E FFECTIVE GROUNDS OF APPEAL:- 1. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 2,25,54,011/- MADE BY THE ASSESSING OFFICER U/S 36(I)(III) ON ACCOUNT OF PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDITURE ON NON- BUSINESS INTEREST FREE ADVANCES MADE BY THE ASSESSEE. ITA NO.300/CHD/2018 M/S SEL TEXTILES LTD, LUDHIANA 2 2. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 9,23,231/- ON ACCOUNT OF DELAYED DEPOSIT OF EMPLOYEES CONTRIBUTION TO ESIC, FP AND EPF BY IGNORING PROVISIONS OF SECTION 36(1)(IV) OF THE I.T. ACT, 1961 AND CBDT CIRCULAR NO. 22/2015 DATED 17.12.,2015. 3. GROUND NO.1 : GROUND NO.1 IS REGARDING THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER U/S 36 (I) (III) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE LD. ASSESSING OFFICER HAS MADE THE IMPUGNED DISALLOWANCE WHILE OBSERVING THAT THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCES OF RS. 38.49 CRORES TO M/S 3A EXPORTS. HE FURTHER OBSERVED THAT THE ASSESSEE, ON THE OTHER HA ND, HAD CLAIMED INTEREST EXPENDITURE. HE, THEREFORE, HELD THAT THE INTERES T BEARING FUNDS HAD BEEN USED FOR MAKING THE IMPUGNED DISALLOWANCE AND ACCOR DINGLY MADE THE IMPUGNED DISALLOWANCE. THE LD. CIT(A), HOWEVER, DE LETED THE AFORESAID DISALLOWANCE MADE BY THE ASSESSING OFFICER, OBSERVI NG THAT THE ASSESSEE HAD ITS OWN SUFFICIENT FUNDS TO MEET THE AFORESAID INVESTMENTS. HE, IN THIS RESPECT OBSERVED THAT AGAINST THE INVESTMENT OF RS. 38.49 CORES, AS PER THE BALANCE SHEET, THE ASSESSEE COMPANY HAD SHARE CAPIT AL AND RESERVES AS ON 31.3.2014 AT RS. 530.77 CRORES. HE, IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KASPSONS ASSOCIATES, 381 ITR 204 (P&H) AND FURTHER OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD., 379 ITR 347 (SC) AND DELETED THE DISALLOWANCE. THE RELEVANT PART OF THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS REPRODUCED AS UNDER:- 7. THE GROUND NO.4 OF THE APPEAL IS AGAINST THE ORDER PASSED BY THE AO WHO ERRED IN DISALLOWING A SUM OF RS. 2,25,54,011/- OUT OF INTEREST PAID BY RESORT TO PROVISIONS OF SECTION 36(1)(III) ON ACCOU NT ITA NO.300/CHD/2018 M/S SEL TEXTILES LTD, LUDHIANA 3 OF INTEREST TREE ADVANCES. 7.1 THE APPELLANT HAS SUBMITTED THAT IT HAD GIVEN AN ADVANCE OF RS. 38.49 CRORES TO M/S 3A EXPORTS. I T IS SUBMITTED THAT THE SAID ADVANCE WAS GIVEN OUT OF THE INTERNAL ACCRUALS AND INTEREST FREE FUNDS AVAILABLE IN THE BUSINESS. THE RESERVES AND SHARE CAPITAL OF THE APPELLANT COMPANY ARE MUCH MORE THAN THE AMOUNTS ADVANCED. PERUSAL OF THE BALANCE SHEET OF THE APPELLANT COMPANY REVEAL THAT THE TOTA L OF SHARE CAPITAL AND RESERVES OF THE APPELLANT COMPANY AS ON 31.03.2014 WERE RS. 530.77 CRORES. UNDER THESE CIRCUMSTANCES, ALSO THERE WAS NO JUSTIFICATION ON THE PART OF THE ASSESSING OFFICER TO DISALLOW A SUM OF RS. 2,25,54,011/- (CALCULATED @12% ON THE AMOUNTS ADVANCED) OUT OF INTEREST ACCOUNT. 7.2 FURTHER, APPELLANT HAS PLACED RELIANCE ON THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD. REPORTED IN 379 ITR PAGE 340, WHEREIN, THEIR LORDSHIPS HAVE HELD THAT, IF TH E FUNDS AVAILABLE WITH THE ASSESSEE ARE MORE THAN THE AMOUNTS ADVANCED, NO DISALLOWANCE OF INTEREST IS WARRANTED. THE APPELLANT HAS ALSO CITED THE LATEST JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. KAPSONS ASSOCIATES REPORTED IN 381 ITR PAGE 204, THEIR LORDSHIPS HAVE HELD THAT THE APPELLANT HAD SUFFICIENT INTEREST FREE ADVANCES FROM ITS DIRECTORS, SHAREHOLDERS, MEMBERS AND THEIR FAMILIES TO COVER THE INTEREST FREE ADVANCES MADE B Y THE APPELLANT. THE INTEREST ON THE BORROWINGS TO TH E EXTENT INTEREST FREE ADVANCES IS NOT TO BE DISALLOW ED. 7.3 ASSESSING OFFICER HAS STATED IN THE ORDER THAT THE ADVANCES WERE GIVEN TO ITS SISTER CONCERNS AND THEREFORE, PLACING RELIANCE ON THE JUDGMENT OF HONORABLE JURISDICTIONAL HIGH COURT HI THE CASE OF ABHISHEK INDUSTRIES LTD. 286 1TR 1 THE DISALLOWANCE WAS MADE FOR THE PROPORTIONATE EXPENDITURE INCURRED ON ACCOUNT OF INTEREST. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND HAVE ALSO GONE THROUGH TH E COPY OF ACCOUNT AND BALANCE SHEET OF THE APPELLANT COMPANY TO ASCERTAIN THE CLAIM MADE BY THE APPELLANT WITH REGARD TO THE AVAILABILITY OF INTERE ST- FREE FUNDS IN THE BUSINESS. I HAVE ALSO GONE THROUG H ITA NO.300/CHD/2018 M/S SEL TEXTILES LTD, LUDHIANA 4 THE JUDICIAL DECISIONS WHICH HAVE BEEN RELIED UPON BY THE APPELLANT ON THIS ISSUE. 7.4 IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES LTD AND ALSO OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KAPSONS (WHICH IS AFTER THE DECISION OF ABHISHEK INDUSTRIES) WHERE IT HAS BEEN HELD THAT NO DISALLOWANCE COULD BE MADE UNDER THIS SECTION IF AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS IN T HE BUSINESS HAS BEEN ESTABLISHED. ACCORDINGLY, TAKING THESE FACTS AND JUDICIAL DECISIONS INTO ACCOUNT, AO IS BEING DIRECTED TO DELETE THE DISALLOWANCE OF RS.2,25,54,011/-MADE ON THIS ACCOUNT. THUS, APPEAL FILED BY THE APPELLANT ON THIS GROUND IS ALLOWED. 4. THE LD. DR THOUGH HAS RELIED ON THE FINDING S OF THE ASSESSING OFFICER, HOWEVER, COULD NOT REBUT THE FACTUAL FIN DINGS GIVEN BY THE LD. CIT(A) ON THE ABOVE ISSUE. IN VIEW OF THIS, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. 5. GROUND NO.2: THIS GROUND IS IN RELATION TO THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 9,23,231/- ON ACCOU NT OF DELAYED DEPOSIT OF EMPLOYEES CONTRIBUTION TO ESIC, FP AND EPF. THE LD . CIT(A) HAS DEALT WITH THIS GROUND IN PARA 8 OF THIS IMPUGNED ORDER A ND OBSERVED THAT THE ASSESSEE HAD DEPOSITED THE AFORESAID PAYMENTS ON AC COUNT OF EMPLOYEES CONTRIBUTION TO ESIC, AND EPF, BEFORE THE DATE OF F ILING OF THE RETURN. HE, THEREFORE, HAS RELIED UPON THE PROVISIONS OF SECTIO N 43B OF THE ACT AND DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. LAKHANI INDIA LTD., 188 TAXMAN.132 AND OF THE HON' BLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD., 319 ITR 306 AND DELETED THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICE R. ITA NO.300/CHD/2018 M/S SEL TEXTILES LTD, LUDHIANA 5 6. BEFORE US, LD. DR COULD NOT POINT OUT ANY DI STINGUISHING FACTS OR CASE LAWS JUSTIFYING OUR INTERFERENCE IN THE ORDER OF TH E CIT(A) ON THIS ISSUE. IN VIEW OF OUR ABOVE OBSERVATION, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2018. SD/- SD/- DATED : 14.11.2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR ( . . , # $ / B.R.R. KUMAR) %& / ACCOUNTANT MEMBER ( / SANJAY GARG ) / JUDICIAL MEMBER